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Carbon Pricing Is Now Forcing Electricity Prices Higher

February 10, 2022

By Paul Homewood

 

While some of the recent energy price rises have been due to international market factors, part is the direct result of government policy.

I mentioned the role of carbon pricing a few months ago in pushing up the cost of electricity.  Since then carbon prices have jumped even higher to £84.50 per tonne. Two years ago they were trading at below £15/tonne (via the EU scheme):

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https://www.catalyst-commercial.co.uk/business-energy-reports/

 

This increase has been deliberately engineered by government, in order to push up the cost of fossil fuel generation so as to make expensive renewables competitive.

The policy is also to track EU carbon prices, which have also rocketed in the last two years.

A typical CCGT plant emits  about 374kg of carbon dioxide for every KWh generated, assuming 53% efficiency. A carbon tax of £84.50/tonne would therefore add about £32/MWh to the cost of gas generation.

Given that the wholesale cost of electricity is currently £208/MWh, this represents a sizeable chunk. Because of the way the electricity market works, this extra cost gets passed on to all sources of generation, not just gas, because CCGT plants tend to set the market price as they are the marginal generators. The report below explains:

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So consumers end up paying this £32/MWh on all of their electricity, which provides a windfall profit to all low carbon generators.

When the UK Emissions Trading Scheme was introduced last year, provision was included to contain costs and prevent market instability in emergencies. Actions allowed include flooding the market with extra permits.

Given the severe energy crisis now upon us, this provision should be triggered immediately.

21 Comments
  1. JimW permalink
    February 10, 2022 5:26 pm

    Deliberately rigged prices to enrich the few at the expense of the many.
    It should be illegal and people prosecuted, but its the government so its OK, because its saving the planet.
    Corruption personified.

  2. February 10, 2022 5:31 pm

    I shall not be crucified upon this cross of Carbon Credits.
    Bryan’s “Cross of Gold” Speech: Mesmerizing the Masses
    The most famous speech in American political history was delivered by William Jennings Bryan on July 9, 1896, at the Democratic National Convention in Chicago. The issue was whether to endorse the free coinage of silver at a ratio of silver to gold of 16 to 1. (This inflationary measure would have increased the amount of money in circulation and aided cash-poor and debt-burdened farmers.)
    Question. What is the World’s Energy Budget?

    Energy and Money are intimately related, which of the two is real? That might sound like a strange question why would I pose it here?
    Fredrick soddy called money the Nothing you get for something before you can buy anything. Essentially money is a measuring unit whether applied to exchange prices or Net worth ( wealth) calculations
    when all is said and done though it is the “Something” that has real use-value in Soddy’s little rhyme, not the Monetary unit.
    Energy is an equally slippery something to nail down but whether its the Tiger in your tank or Energy for life and creature comforts.

    Measuring Energy with monetary units gives us pence or cents per Kilowatt hour or dollars or Kronor per Gallon or Litre in £kw/h and £per Gallon you see that the £sign is the nothing you get and the Gallon or KW/h is the something you get for that nothing. Before deciding which unit of measurement to allocate any something by, one has to decide how much of the something is available and how much of it we feel we need before the next occasion we need to access some more. As individuals we may fill our gas tanks every week, have a propane gas delivery or oil delivery for heating once a quarter, Where our Electricity and gas services or sewage and freshwater services are connected to a utility service then our metered supplies will come with the particular payment plan each utility provider offers, usually these days according to our credit scores.

    Energy though is something which does something, money is a ticket price of entry or access and that is the important point to take away from The First day to Sunday.

    Of the Second way. He who has the Gold makes the rules.

    The late Richard Douthwaite explains very well how Energy and economic activity are intimately related, for this second day on the way to Sunday we will continue to focus on how much energy is available over the period which we can sensibly plan our budget. The slide in the screen capture shows the anticipated Peak Oil moment in around 2015, as it turned out the Peak was shortlived, in any event by a pretty well documented and accepted view there are at least 50 years of Oil reserves available, and should we be making a sensible plan 50 years ahead is actually pretty ambitious after all predictions are difficult especially about the future.

    Gold was primarily an energy currency because more energy meant more gold, and cheaper energy made cheaper gold.
    Gold standard broke down when the Spanish raided America and then Spain started to import everything and lost their interest in making things themselves.
    The curse of oil — too sudden an influx of money.
    If you have a source of energy under your control, then you have the power to decide what is done.
    Importing energy is like a loss of sovereignty.

    Control the debt. Control the Access to energy.

    Swing production control through Carbon Credits.
    Carbon credits and carbon footprints even tons of carbon equivalent metrics are ubiquitous in much modern Sustainable economics literature. Carbon emissions are a handy proxy for how much “Fossil fuel is burnt” some more Sophisticated analysis from say the WEF tend to use Hydrocarbons instead of “Fossil Fuels” but the big three energy sources are Coal, Gas, and Oil and in that order regardless of the present consumption patterns which are definitely not! Market determined. Following the big three, there are two other Staples of modern Energy production and these are Nuclear and Hydro Electric. Then there are Wind, Wave, and Solar which is usually referred to as “Renewables.”
    In the Carbon Credit and Carbon debit system of Cap and Trade and Al gores Billions, The Big Three are Debits, Nuclear is a Don’t know and Hydro Wind Wave and solar are Credits. In the available energy budget on the Debit side, we have 94% and on the credit side 6% The Ratio is interesting, Bear it in mind, it also appears in the slides in the William Jennings Bryan video above.

    So the good credits for renewables amount to 5.7% of 2020 production and growing if the current dispute at the Eu where Nuclear and Natural gas are touted for inclusion in the definition, In any event, the blueprint for the Credit side of the Carbon monetary equation has 5.7% of the supply of good energy ranged against 94.3 % of the energy supply which is bad.
    let’s say 6/94 or a ratio of 15.6 to 1.

    The History of the Gold-Silver Ratio
    Historically, the gold-silver ratio has only evidenced substantial fluctuation since just before the beginning of the 20th century. For hundreds of years prior to that time, the ratio, often set by governments for purposes of monetary stability, was fairly steady.

    The Roman Empire officially set the ratio at 12:1. The ratio reached 14.2:1 in Venice in 1305 and remained at this level up until 1330 when it fell to 10:1. In 1350 it fell to 9.4:1 in some places across Europe. It climbed back to 12:1 in the 1450s.1 The U.S. government fixed the ratio at 15:1 with the Coinage Act of 1792.2

    The discovery of massive amounts of silver in the Americas, combined with a number of successive government attempts to manipulate gold and silver prices, led to substantially greater volatility in the ratio throughout the 20th century.

    If one observes the long game the dominant Narrative of the past 30 years is CLimate Change and CO2 emission being the only think anyone need to focus upon. The Carbon footprint narrative is by a long chalk well ahead of the curve even with the relatively short but seemingly endless Pandemic and Vaccine Narratives of the Past two years. John here on the slog in his naming name series called out Larry Fink of Blackstone, Blackstones Going Direct is considerably more powerful a control lever on what happens next than the efforts of Bill Gates and Dr Fauci to enrich Big Pharma and themselves, Gates also has a bigger card in the game and that is Digital ID and its relationship to both Near earth Satellite networks and the 5G networks, which coincidentally really were rolling out at the same Time as the Wuhan Event, also in coincidentally Wuhan. The Vaccines and Vaccine Injury is very much closely related to the Adjuvants and not necessarily the Pathogen dose delivered in the solution of the Adjuvant. It is the Adjuvant rather than the disease which is of interest to the 5G / ID aspects of what the past two years have really been all about. The Repo Spike in Newyork on September the 19th was the starting pistol, of course, the dress rehearsal was Event 201, The Objective was almost certainly to gain widespread acceptance of DIgital ID’s on Smart Phone devices and possibly by stealth through Nano technology within the Adjuvant solutions in the MRNA vaccines( Experimental Gene Therapies?). SO what about Climate Change , COS and all that, no its not the Graphine found in some adjuvant samples but the Rationing of Carbon through a Carbon based currency which is why the CLimate Change Agenda particularly the CO2 control knob is so important. My Blog today shows that the ratio of Good Energy ( renewables) for which Carbon Credits will be created and Bad Energy of “Fossil Fuels is 16:1 there are various combinations which could see the ratio vary but essentially as with The Gold Standard a Carbon Credit Renewables Standard has the same ration as the Historical Bi-Metallic ration known to numasticists the world over. A deflationary centralised banking regime will be able to impose Austerity to an authoritarian extent extending to a population control mechanism, This is a far more likely delivery mechanism for Rapid population reduction policies than any Vaccination regime, Famine equally is a far more effective and efficient means of population reduction than certainly War or any other form of genocide, also for the Authoritarian regime deploying ity it is also complete with a shield of plausible deniability. Just my 10 cents per KW/h or my 100 euros/tonne of CO2
    https://www.reuters.com/business/energy/europes-carbon-price-nears-100-euro-milestone-2022-02-04/

    https://notthegrubstreetjournal.com/2022/02/06/the-six-ways-on-sunday-carbon-currency-end-game-16-to-1-on-what-are-the-odds-of-that/

    The Seeds Cart before the Usury Horse. Why SEEDS ECOE Doomsday has not and may never arrive.
    Dr. Morgan is quite right regarding how essential Energy is to a modern economy.
    The price of energy production is of course logically connected to the available energy or Surplus Energy available for productive purposes within the real economy. This tautology is though only part of the story.
    Before reaching the same conclusion that the inevitable age of surplus energy has arrived the Nature of the Debt-based model used in the creation of the money used as the measure of and currency for exchange in modern political economy must first be accounted for. A sensible explanation of the main contributory causes of the present difficulties faced by the Global economy particularly in the Post Fordist developed economies is assisted with a judicious application of Occam’s razor..
    Dr Morgan says that “before the coronavirus crisis, Britain had been borrowing more than £4 for each £1 of “growth” whilst this is broadly correct the allocation of the debt, largely to the FInancialised sector for speculation on non-productive purposes such as Share buybacks, and purchases of existing assets and not for production actually make Professor Richard Werner’s work of the dis-aggregated theory of credit a much more significant cause of the low growth delivered by each additional unit of debt. and not the energy cost of Energy, Ecoe is a theory whose time has not come and may still not ever arrive.
    https://notthegrubstreetjournal.com/2022/02/09/the-seeds-cart-before-the-usury-horse-why-seeds-ecoe-doomsday-has-not-and-may-never-arrive/

    Putting the Peakist cart before the usury horse. The Carbon Credit crucifixion of democracy.

    Gail in this article is putting the Peakist cart before the usury horse.
    The renewables carbon credits relationship is designed to replace the PetroDollar as world reserve currency with renewables production replacing Saudi Arabia as the world swing producer of Oil which in turn regulates the global money supply and access to energy resources.

    https://notthegrubstreetjournal.com/2022/02/10/putting-the-peakist-cart-before-the-usury-horse-the-carbon-credit-crucifixion-of-democracy/

  3. jimlemaistre permalink
    February 10, 2022 5:33 pm

    As always Paul, you hit the nail on the head. ‘Green Energy’ is Very expensive ! All aspects of the infrastructure and their roll out far exceed what is required to deliver conventional Electricity with fossil fuels. That said, what is missing in the analysis of ‘Green Energy’ is all the ‘Embedded Environmental Costs’ that NEVER gets discussed in the Media. If or When those costs become ‘Relevant’ in the discussion, wind and Solar and Bio-Fuels and EV’s would plummet in public opinion . . . and they would STOP being called GREEN ! They would just become ‘Alternate Power sources’ as they truly are . . .

    https://www.academia.edu/71021345/All_Electricity_Even_Renewables_Poisons_Planet_Earth

    https://www.academia.edu/71023588/Batteries_Renewable_Energy_and_EV_s_The_Ultimate_in_Environmental_Destruction

    My Thoughts . . .

  4. Penda100 permalink
    February 10, 2022 5:45 pm

    Why don’t we hear about this scandal on the BBC? (Sarc intended)

  5. ian miller permalink
    February 10, 2022 5:56 pm

    I clearly remember being told that “with renewable Wind Energy, it would be so cheap that it would not be worth invoicing it”. Whatever can have gone soooo wrong ???

    • Phoenix44 permalink
      February 11, 2022 9:20 am

      Somebody pointed out the capital costs needed to be repaid? And the maintenance costs? And the disposal costs?

  6. February 10, 2022 6:56 pm

    Whenever I read stories like this I recall when the rules were written for solar and wind, the renewable industry kept saying they needed “certainly”. Those rules made unreliable power a generator of guaranteed profits, i.e. certainty.

  7. Realist permalink
    February 10, 2022 7:11 pm

    Disgraceful behaviour by politicians.

  8. Bill Treuren permalink
    February 10, 2022 9:41 pm

    For the record we have had some warming some of which may be CO2 related, we have no climate crisis.
    Smart meters can be very good and allow the “generation order of merit” to be met or fortified with a “demand order of merit”.
    By way of example if electricity prices are high at a spot level due to cold or a drought as happens in New Zealand the customers would have an individual choice of being a little cooler thus reducing demand and also reducing the consequent spot price.
    People are in different points of need at different times in their lives. As a university student we would have willingly frozen for a dollar or two not so much now.
    Should there be a CO2 tax? Well if all countries adopted one at the same level say $50/ton and all subsidies were to go on generation it would just bias the Order of merit but market rationality would remain and yes less CO2 would be emitted.
    If that was the sum total of the Green movement I would be happy, but we know its about Socialism don’t we.
    Otherwise solutions such as gas and nuclear would form a part of the solution and stripping the world of forests to burn in coal fired power stations would be seen for it’s insanity would it not!

    • February 11, 2022 10:22 am

      Bill,
      no to any CO2 tax, it distorts any market and makes money for traders.
      You omitted to mention business, few can make alterations to their electricity demand so will be paying high prices which adds to overheads which ultimately increases inflation. No one benefits.
      We have abandoned a properly functioning electrical generating system and have built a poorly performing system, where rationing is becoming normal and prices are much higher than they should be.
      Government intervention always degrades anything it touches.

  9. It doesn't add up... permalink
    February 10, 2022 10:50 pm

    John Redwood asked about this after I had mentioned the problem a couple of times on his blog:

    Question:
    To ask the Secretary of State for Business, Energy and Industrial Strategy, for what reason he has not abated the carbon price in response to changes in the level of carbon price. (110215)

    Tabled on: 24 January 2022

    Answer:
    Greg Hands:

    Following the triggering of the UK Emissions Trading Scheme’s Cost Containment Mechanism, the UK Emissions Trading Scheme Authority (made up of the UK Government, Scottish Government, Welsh Government and Northern Ireland Executive) considered the factors that may have affected allowance prices, and agreed that not intervening in the UK Emissions Trading Scheme was the right course of action in both December and January. The Authority issued a statement after both decisions, with its reasons, on gov.uk.

    The answer was submitted on 01 Feb 2022 at 17:54.

    The gov.uk entry:

    https://www.gov.uk/government/publications/uk-emissions-trading-scheme-ets-authority-cost-containment-mechanism-decisions/uk-ets-authority-statement-cost-containment-mechanism-decision-january-2022

    The UK ETS Authority recognises the sensitivity of the issues under consideration in the context of concern about energy prices and determination to tackle climate change. Ministers discussed these issues, acknowledging that any final decision was finely balanced. Following debate on these points the conclusion reached was that the UK ETS Authority should not intervene at this time, having also taken this approach following the December triggering of the CCM. This decision, like that in December, is aimed at upholding the objectives of the UK ETS as a market-based approach to reducing emissions and incentivising participants to find the most cost-effective solutions to decarbonise.

    a.k.a. stuff you, you can eat carbon allowances at twice the price. It makes our green troughing so much more profitable.

  10. February 10, 2022 10:57 pm

    Taxing carbon dioxide is a bad joke dreamed up by financiers. Nothing to do with the climate.

    • jimlemaistre permalink
      February 10, 2022 11:04 pm

      Exactly ! Read about the one trillion dollar annual Scam . . .

      https://www.academia.edu/71023588/Batteries_Renewable_Energy_and_EV_s_The_Ultimate_in_Environmental_Destruction

      Or then add these just to see . . . All the stuff environmentalists want us to ignore . . .

      How much energy does it take, on average, to produce 1 kilogram of the following materials?

      • Steel (from recycled steel): 6-15MJ (1,665 to 4,170 watt-hours).
      • Aluminum (from 100 % recycled aluminum): 11.35-17MJ (3,150 to 4,750 watt-hours)
      • Iron (from iron ore): 20-25MJ (5,550 to 6,950 watt-hours)
      • Glass (from sand, etcetera): 18-35MJ (5,000 to 9,700 watt-hours)
      • Steel (from iron): 20-50MJ (5,550 to 13,900 watt-hours)
      • Paper (from standing timber): 25-50MJ (6,950 to 13,900 watt-hours)
      • Plastics (from crude oil): 62-108MJ (17,200 to 31,950 watt-hours)
      • Copper (from sulfide ore): 60-125MJ (16,600 to 34,700 watt-hours)
      • Aluminum (from a typical mix of 80% virgin and 20% recycled aluminum): 219 MJ
      (60,800 watt-hours)
      • Silicon (from silica): 230-235MJ (63,900 to 65,300 watt-hours)
      • Nickel (from ore concentrate): 230-270MJ (63,900 to 75,000 watt-hours)
      • Aluminum (from bauxite): 227-342MJ (63,000 to 95,000 watt-hours)
      • Titanium (from ore concentrate): 900-940MJ (250,000 to 261,000 watt-hours)
      • Electronic grade silicon (CVD process): 7,590-7,755MJ (2,108,700 to 2,154,900 watt-
      hours) . . . Inside ALL Solar Panels !!

      How much energy does it take (on average) to produce 1 kilogram of the following materials? – LOW-TECH MAGAZINE (lowtechmagazine.com)

  11. Mikehig permalink
    February 10, 2022 11:07 pm

    The OBR puts the cost for 2022/3 at £4.9 bn:
    https://obr.uk/efo/economic-and-fiscal-outlook-october-2021/
    That’s on top of all the other green levies, of course.

    • It doesn't add up... permalink
      February 11, 2022 4:33 am

      At that point the price was around £60/tonne CO2e. The Allowances to be auctioned are about 80 million over the year. So at £90/tonne CO2e which we hit recently, that’s £7.2bn.

    • Phoenix44 permalink
      February 11, 2022 9:28 am

      So the top end of the supposed saving we will get from surge pricing using smart meters. Government increases our prices then claims to be “helping” us by reducing some of that increase.

      Maybe Paul could do a back of the envelope cost assuming we never put in place renewables or taxes etc and kept coal? That’s what we really need to counter the lies about Net Zero.

  12. David Waller permalink
    February 11, 2022 8:42 am

    If memory serves me correctly that is what they said at the time north sea oil was discovered. History repeating itself.

  13. Phoenix44 permalink
    February 11, 2022 9:25 am

    And that description neatly gives the lie to claims that Net Zero isn’t responsible for high energy prices. Destroying coal plants has removed competition and removed the arbitrage between coal and gas as the marginal price. Had we kept coal plants they would have been used instead of gas plants and prices would have been lower.

    • February 11, 2022 5:19 pm

      Coal is at 5.3% of UK electricity generation just now. Obviously running close to max capacity with only a few plants left in the UK, to save money on newly-expensive gas.

    • Graeme No.3 permalink
      February 12, 2022 5:18 am

      One of the reasons that China, India and many other countries are building coal-fired plants is that coal is cheaper. So politicians have resorted more and more complications.
      One wonders what Lewis Carroll would have made of the current UK scheme?

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  1. Carbon Pricing Is Now Forcing UK Electricity Prices Higher – Rightwave

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